Proof of Growth: Stacking DAO Insider - The Ultimate Stacks DeFi Guide

Welcome to the Stacking DAO Insider – your go-to source for all things Bitcoin, Stacks, and the future of DeFi!

As pioneers in the Stacks ecosystem, we’re thrilled to bring you exclusive insights, the latest updates, and expert analysis straight from the frontier of decentralized finance.

Whether you’re a seasoned stacker or just starting your journey, this newsletter is packed with everything you need to stay ahead in the world of crypto. Get ready to unlock new opportunities and elevate your DeFi game!

Stacking DAO is the leading liquid staking protocol on Stacks, allowing users to earn consensus rewards from stacking STX tokens while retaining liquidity by minting stSTX or stSTXbtc.

This enables users to participate in Stacks DeFi activities like trading, lending or providing liquidity, maximizing yield opportunities while still securing the network.

Over the last two cycles, the yield for holding stSTX has averaged7.88% APY, paid in additional STX tokens. Stack Today Here!

Unlocking Stacks DeFi: The Ultimate Guide to Strategies & Yield Opportunities

Bitcoin DeFi is evolving rapidly, and Stacks is at the forefront of this transformation. With the Nakamoto upgrade delivering faster transactions, Bitcoin finality, and a trust-minimized BTC peg, Stacks is enabling a secure and composable DeFi ecosystem for Bitcoin.

From stablecoins and liquid staking to lending markets and liquidity provisioning, the Stacks ecosystem now offers a wide range of yield opportunities. Whether you’re looking to earn passive income, borrow against your assets, or maximize DeFi synergies, there’s a strategy for every user.

Let’s dive into the top DeFi platforms and yield strategies available today on Stacks.

Crypto-Backed Stablecoins with Arkadiko

Arkadiko is one of the most versatile DeFi protocols on Stacks, offering a decentralized stablecoin ($USDA), DEX AMM and yield farming opportunities. Unlike traditional stablecoins, $USDA is minted by collateralizing assets such as $STX, $stSTX, or $sBTC, providing liquidity without the need to sell.

A powerful strategy involves borrowing $USDA at a 6% interest rate and immediately swapping it for $USDh on Hermetica, a stablecoin that can be staked for ~33% APY. This creates a >20% arbitrage opportunity, allowing users to generate a net yield while keeping their original collateral intact. However, since the borrowed $USDA is backed by collateral, users must maintain a vault value above 140% to avoid liquidation.

Arkadiko provides a highly capital-efficient way to access liquidity while maintaining exposure to Bitcoin-native assets, making it a cornerstone of the Stacks DeFi ecosystem.

Minting USDh with Hermetica

Hermetica is revolutionizing yield-generating stablecoins on Stacks through $USDh, which is backed by an innovative Bitcoin basis carry trade strategy. Unlike conventional yield-bearing assets, $USDh is minted using Bitcoin, $USDA, or $aeUSDC and generates ~33% APY by taking advantage of market inefficiencies.

Hermetica achieves this by longing spot Bitcoin and shorting perpetual futures contracts, effectively capturing the funding rate differential. By staking $USDh for $sUSDh, users are able to earn the yield generated from the protocol’s carry trade strategy.

For those seeking high-yield stablecoin exposure, Hermetica provides an attractive alternative to traditional DeFi lending protocols, allowing users to earn Bitcoin-native returns without actively managing positions.

Borrowing & Lending with Zest Protocol

Zest Protocol is pioneering on-chain lending markets on Stacks, enabling users to earn yield or access liquidity through decentralized borrowing and lending. By supporting assets like $sBTC, $stSTXbtc, $STX, and $aeUSDC, Zest allows users to deposit collateral to earn yield and protocol points, which could unlock future governance or incentive rewards.

For users looking to leverage DeFi opportunities, borrowing against these assets can provide additional liquidity to deploy into higher-yield strategies such as liquidity provisioning or stablecoin arbitrage.

As Stacks DeFi matures, Zest is expected to become a critical component of the ecosystem’s financial infrastructure, offering a secure and efficient way to optimize capital deployment.

Liquid Staking with Stacking DAO

Liquid staking is one of the most powerful innovations in DeFi, allowing users to participate in Stacking (Stacks-native staking) while maintaining liquidity. Stacking DAO offers two key liquid staking products:

stSTX: A liquid token representing STX locked for Stacking, which earns ~10% APY in STX rewards. Users can hold stSTX as a yield-bearing asset or deploy it across DeFi for additional returns.

stSTXbtc: A similar product, but instead of earning STX rewards, users receive sBTC (~10% APY), which provides a Bitcoin-denominated yield while participating in Stacking.

By converting STX into liquid staking tokens, users unlock capital efficiency, allowing them to stack rewards while simultaneously engaging with Stacks DeFi protocols.

Liquidity Provisioning on DEXs

Stacks’ decentralized exchange (DEX) ecosystem is expanding rapidly, with multiple platforms offering high-yield liquidity pools. Users who provide liquidity can earn rewards from trading fees, incentive programs, and governance tokens while supporting decentralized trading on Stacks.

Bitflow Finance offers some of the highest yields in DeFi today, with liquidity providers earning APY >100% in Runes pools such as $sBTC / $DOG and $sBTC / $BDC.

Velar BTC rewards liquidity providers in $STX / $stSTX and $STX / $sBTC pools with Velar token incentives and fees (~20% APY).

ALEX Lab is driving memecoin liquidity through its Surge campaign, where LPs in the $STX / $Welsh pool can earn ~105% APY.

These yield opportunities make liquidity provisioning one of the most attractive strategies in Stacks DeFi, allowing users to earn high returns while supporting the decentralized trading infrastructure.

Maximizing DeFi Synergies

What makes Stacks DeFi uniquely powerful is its composability, meaning multiple strategies can be combined for even greater rewards. By leveraging liquid staking, stablecoin arbitrage, lending, and liquidity provisioning, users can optimize their capital allocation and maximize yield opportunities.

For example:

- Minting $USDA on Arkadiko, swapping it for $STX on Bitflow, and leveraging up your STX position can amplify long exposure.

- Staking $STX with Stacking DAO, receiving $stSTX, and then deploying it on DEXs like Bitflow or Velar can earn stacked yield from multiple sources.

- Minting $USDh on Hermetica and lending it on Zest allows users to capture both DeFi lending yield and protocol incentives.

These synergistic strategies showcase the unique opportunities Stacks DeFi provides, allowing users to generate superior returns while keeping their assets within the Bitcoin economy.

Why Stacks DeFi Matters

Stacks is bringing real DeFi functionality to Bitcoin, enabling trustless and permissionless financial applications that preserve Bitcoin’s security and decentralization. With faster transactions, Bitcoin finality, and a trustless BTC peg, Stacks is positioning itself as the premier Bitcoin Layer 2 for DeFi.

What’s Your Favorite Stacks DeFi Strategy?

Are you already using these yield opportunities, or have you discovered a hidden gem within the Stacks ecosystem? Which DeFi strategy has been the most rewarding for you?

Reply and let us know! Your insights help grow the Stacks DeFi community and unlock new opportunities for all users.

Stay tuned for more updates from Stacking DAO as Bitcoin DeFi continues to evolve!

The Stacks DeFi Show #52

On the latest episode of the Stacks DeFi Show, Stacking DAO core contributors Tycho and Philip discussed the latest developments of DeFi protocols Hermetica and ALEX. Click here to listen to the episode!

Around the Ecosystem

Stacking DAO Details:

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